"The New Face of 'Poverty'," by James Taranto, The Wall Street
Journal Best of the Web Newsletter, April 22, 2011

Among "the persons whom the Census Bureau
identifies as 'poor,' " 38% were homeowners. Among "poor" households, 62%
owned a car, 14% two or more cars, nearly half had air-conditioning, and 31%
had microwave ovens. "Nationwide, some 22,000 'poor' households have heated
swimming pools or Jacuzzis." [botwt0422] Apple.com

One thing only rich people had back in 1990,
though, was portable telephones. That's changed, hasn't it? If you're
reading this column, you very likely have a cellular phone. You may even be
reading this column on your cellular phone.

But cellphones aren't just ubiquitous. In what the
New York Times calls "a strange twist," they've become symbols of poverty.
Arkansas and Mississippi, those perennial economic laggards, "find
themselves at the top of a new state ranking: They have the highest
concentrations of people in the nation who have abandoned landlines in favor
of cellular phones."

For the suffering of Karl Marx the exile, we can
feel compassion; for his elaborate theoretical system, benign doubt and
perhaps selective approval; for the abominable practices instituted in his
name, loathing. A requiem for Marx cannot ignore the iniquities of his
offspring -- prophets and messiahs must share the blame for the excesses of
their followers -- but the banner that he unfurled need not be interred with
his bones. Even a skeptical utopian like myself can still believe in the
worth of the guiding principle: from each according to his abilities, to
each according to his needs

What an interesting turn in our running debate over
ethanol with Newt Gingrich, the former GOP Speaker who wants to be
President. Professor Gingrich says his ethanol support is grounded in his
lifetime of studying history and intellectual problems, but what about that
$312,500 from the ethanol lobby?

The Center for Public Integrity has examined IRS
records and reports that Mr. Gingrich's shop earned that sum for his role as
a "consultant" in 2009 for Growth Energy, one of the ethanol lobbies. The
center cites documents listing his duties as speaking "positively on ethanol
related topics to media," plus giving advice on "strategy and communication
issues." Mr. Gingrich's salvos against us came in a lecture to the Renewable
Fuels Association, a separate ethanol lobby, so we have to admit the Speaker
is ecumenical in his salesmanship.

Rick Tyler, Mr. Gingrich's spokesman, notes his
boss has long supported ethanol, including during his time in Congress.
We've never suggested Mr. Gingrich has been bought off, though of course
there wouldn't be an ethanol lobby to hire Mr. Gingrich if there weren't
politicians like Mr. Gingrich willing to prop it up with taxpayer dollars,
tariffs and mandates.

In a letter responding to our January 31 editorial
"Professor Cornpone," he wrote—in what we'd call a Clintonian
construction—that "I am not a lobbyist for ethanol, not for anyone." Mr.
Tyler reiterates that Mr. Gingrich "has never been a lobbyist and had never
lobbied," though in our view the Beltway distinction between "consultant"
and "lobbyist" is nominal.

Simplifying the tax code should be a top priority.
Regardless of the reform approach taken, the U.S. economy will be enhanced
greatly by significantly reducing the complexity of the current tax code. In a
time of global economic competition, we cannot afford the luxury of a Byzantine
tax system.

The fact is, some schools represent terrific
investments. At Caltech, financial aid recipients can expect to spend $91,250
for a degree that over 30 years will allow them to repay that investment and
out-earn a high school graduate by more than $2 million. But schools like
Caltech are the exception that proves the rule: most students would be better
off investing their college nest eggs in the S&P 500 rather than a college
education. So if you are going to choose college, it pays to choose wisely.Louis Lavelle, Business Schools Editor Bloomberg Business Week,
April 14, 2011

Jensen Comment
Unlike in Germany, what is lacking in the United States is a status, prestige,
and in some instances high earnings in the skilled trades. Our best and
brightest high school students want to go to college rather than trade schools
schools and apprenticeships like those skilled workers that thrive in Germany.
As a result we get high school graduates that are wiping out the retirement
savings of their parents and putting themselves deep in debt just for college
degrees so they can stand in unemployment lines four to seven years later, some
with PhDs in hand who are seeking to sell Big Macs and fries.

Last week a television news
program featured a woman who graduated from Columbia University with an $80,000
government loan to pay back. She got a relatively low paying job that required a
college degree, but her scheduled loan repayments will run on for 20 more years
until she is about 50 years old.

We're bombarded with
statistics about how much more the "average college graduate" makes than a mere
high school graduate. However, nobody's exactly average at the mean. Means
suffer from things like kurtosis, heteroscedasticity, nonstationarities, Black
Swans, and 50% or more of the sampling population that's below the earned income
means. Many naive people think they are assured of higher earnings if they get a
college degree. How little they understand if they believe that fallacy and
along with the legend of Santa Claus. Until it's too late, they just don't
realize how many law school graduates. MBA graduates, and even nursing graduates
are now collecting unemployment benefits or working jobs that require no college
education. Times have now changed for women who must think of supporting
themselves and their families rather than just marry high income husbands that
have become much less likely to be "high income" husbands.

Of course
there's much more to education than a career. But in this age it's possible to
become superbly educated on your own if you have the drive to take advantage of
all the free offerings that are available for an education that is not
necessarily encumbered by career aspirations. You can be a licensed plumber and
a literary scholar if being a literary scholar is an aspiration in life ---
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Tomorrow's release of the movie version of "Atlas
Shrugged" is focusing attention on Ayn Rand's 1957 opus and the free-market
ideas it espouses. Book sales for "Atlas" have always been brisk—and all the
more so in the past few years, as actual events have mirrored Rand's
nightmare vision of economic collapse amid massive government expansion.
Conservatives are now hailing Rand as a tea party Nostradamus, hence the
timing of the movie's premiere on tax day.

When Rand created the character of Wesley Mouch,
it's as though she was anticipating Barney Frank (D., Mass). Mouch is the
economic czar in "Atlas Shrugged" whose every move weakens the economy,
which in turn gives him the excuse to demand broader powers. Mr. Frank
steered Fannie Mae and Freddie Mac to disaster with mandates for more
lending to low-income borrowers. After Fannie and Freddie collapsed under
the weight of their subprime mortgage books, Mr. Frank proclaimed last year:
"The way to cure that is to give us more authority." Mouch couldn't have
said it better himself.

But it's a misreading of "Atlas" to claim that it
is simply an antigovernment tract or an uncritical celebration of big
business. In fact, the real villain of "Atlas" is a big businessman,
railroad CEO James Taggart, whose crony capitalism does more to bring down
the economy than all of Mouch's regulations. With Taggart, Rand was
anticipating figures like Angelo Mozilo, the CEO of Countrywide Financial,
the subprime lender that proved to be a toxic mortgage factory. Like
Taggart, Mr. Mozilo engineered government subsidies for his company in the
name of noble-sounding virtues like home ownership for all.

Still, most of the heroes of "Atlas" are big
businessmen who are unfairly persecuted by government. The struggle of
Rand's fictional steel magnate Henry Rearden against confiscatory regulation
is a perfect anticipation of the antitrust travails of Microsoft CEO Bill
Gates. In both cases, the government's depredations were inspired by
behind-the-scenes maneuverings of business rivals. And now Microsoft is
maneuvering against Google with an antitrust complaint in the European
Union.

The reality is that in Rand's novel, as in life,
self-described capitalists can be the worst enemies of capitalism. But that
doesn't fit in easily with the simple pro-business narrative about Rand now
being retailed.

Today, Rand is celebrated among conservatives: Rep.
Paul Ryan (R., Wis.) insists that all his staffers read "Atlas Shrugged." It
wasn't always this way. During Rand's lifetime—she died in 1982—she was
loathed by the mainstream conservative movement.

Rand was a devout atheist, which set her against
the movement's Christian bent. She got off on the wrong foot with the
movement's founder, William F. Buckley Jr., when she introduced herself to
him in her thick Russian accent, saying "You are too intelligent to believe
in God!" The subsequent review of "Atlas Shrugged" by Whittaker Chambers in
Buckley's "National Review" was nothing short of a smear, and it set the
tone for her relationship with the movement ever since—at least until now.

Rand rankled conservatives by living her life as an
exemplary feminist, even as she denied it by calling herself a "male
chauvinist." She was the breadwinner throughout her lifelong marriage. The
most sharply drawn hero in "Atlas" is the extraordinarily capable female
railroad executive Dagny Taggart, who is set in contrast with her boss, her
incompetent brother James. She's the woman who deserves the man's job but
doesn't have it; he's the man who has the job but doesn't deserve it.

Rand was strongly pro-choice, speaking out for
abortion rights even before Roe v. Wade. In late middle age, she became
enamored of a much younger man and made up her mind to have an affair with
him, having duly informed her husband and the younger man's wife in advance.
Conservatives don't do things like that—or at least they say they don't.

These weren't the only times Rand took positions
that didn't ingratiate her to the right. She was an early opponent of the
Vietnam war, once saying, "I am against the war in Vietnam and have been for
years. . . . In my view we should fight fascism and communism when they come
to this country." During the '60s she declared, "I am an enemy of racism,"
and advised opponents of school busing, "If you object to sending your
children to school with black children, you'll lose for sure because right
is on the other side."

If anything, Rand's life ought to ingratiate her to
the left. An immigrant woman, she arrived alone and penniless in the United
States in 1925. Had she shown up today with the same tale, liberals would
give her a driver's license and register her to vote.

It’s a blessing, I suppose, that Ayn Rand,
who loved the movies, and actually worked
extensively in the industry, isn’t alive to
see what’s been made of her most influential
novel. The new, long-awaited film version of
Atlas Shrugged is a mess, full of
embalmed talk, enervated performances,
impoverished effects, and cinematography
that would barely pass muster in a TV show.
Sitting through this picture is like
watching early rehearsals of a stage play
that’s clearly doomed.

The movie is especially disappointing
because Rand’s 1957 book, while centrally
concerned with ethical philosophy (and
inevitably quite talky), has a juicy plot
that, in more capable hands, might have made
a sensational film. (That possibility, alas,
may now be closed off.) As anyone reading
this will probably know, the story concerns
strong-willed Dagny Taggart, who’s fighting
to save her family railroad, Taggart
Transcontinental, from the inept leadership
of her brother, James, a moral weakling, and
from the metastasizing reach of government
regulation. Dagny finds a kindred spirit in
Henry Rearden, a principled industrialist
who has formulated a new kind of steel that
Dagny intends to use in upgrading
Transcontinental’s decaying tracks. She and
Rearden are opposed at every turn by
collectivist politicians and corporate
titans corrupted by their addiction to the
government teat. Meanwhile, the nation’s
most productive businessmen, demoralized by
rampant political interference, are
vanishing one by one from the public scene.
And a mysterious figure named John Galt
appears to have something to do with
this.

The film was obviously a labor of love for
producer John Aglialoro, a multimillionaire
Randian who held movie rights to the book
for 18 years, and made every effort to set
it up as a professional production.
(Angelina Jolie was famously attached at one
point.) Then, last year, with his option
running out, Aglialoro decided he had no
choice but to make the movie himself. He
quickly hired Brian Patrick O’Toole, a
writer of low-budget horror films, to work
with him on the script, and an actor, Paul
Johannson (of TV’s One Tree Hill)
to direct. He also managed to sign some
seasoned professionals for the cast: Graham
Beckel (Brokeback Mountain) in the
role of oil magnate Ellis Wyatt; Edi Gathegi
(from the Twilight movies) in the
part of Dagny’s loyal lieutenant Eddie
Willers; and two veterans of Coen brothers
films, Michael Lerner and Jon Polito, to
play political fixer Wesley Mouch and the
collusive corporate sleaze Orren Boyle.

Unfortunately, Aglialoro then cast a pair of
TV actors in the key roles of Dagny and
Rearden. Taylor Schilling (Mercy)
is an appealing performer, but she’s not
really equipped to project Dagny’s
passionate determination; and Grant Bowler (True
Blood), an actor of low-key warmth, is
too unassertive to hold the screen as the
uncompromising Rearden. It may be unfair to
judge these two on their work here—they
don’t seem to have been given much in the
way of useful direction, and they’ve been
set adrift in a succession of poorly blocked
and shot scenes. Because of budget
constraints, presumably, the whole movie
seems underpopulated; and the one big party
sequence is so low on energy that it
resembles a casting call for which the
auditioning actors have turned up already in
costume. There’s quite a bit of narrative
padding and a woeful lack of action. We see
rather too much footage of sleek trains
speeding through countryside (assisted at
times by surprisingly crude computer
generation), and there are lingering shots
of hilly, verdant landscapes shoehorned into
the proceedings to no purpose. (At one point
there’s even a close-up of a flower.)

Anyone not familiar with Rand’s novel will
likely be baffled by the goings-on here.
Characters spend much time hunkered around
tables and desks nattering about rail
transport, copper-mining, and the oil
business. A few of these people are stiffly
virtuous (“I’m simply cultivating a society
that values individual achievement”), but
most are contemptible (“We must act to
benefit society”…“a committee has
decided”…“We rely on public funding.”) These
latter creeps should set our blood boiling,
but they’re so cartoonishly one-dimensional
that any prospective interest soon slumps.
We are initially intrigued by the
recurring question, “Who is John Galt?” But
since the movie covers only the first third
of the novel (a crippling miscalculation),
we never really find out, apart from
noticing an anonymous figure lurking around
the edges of the action, togged out in a
trench coat and a rain-soaked fedora like a
film-noir flatfoot who’s wandered into an
epoch far away from his own.

Rand’s book is set in an unspecified future
that bears a startling resemblance to our
own here-and-now. There’s a stock-market
collapse, much populist demagoguery and
union thuggery, and chaos in the Middle East
that has driven gas prices to $37 a gallon
(which purportedly explains the
resuscitation of railroads as the only
affordable transport for passengers and
freight). The book is set in an unspecified
future; the movie relocates the story to the
year 2016, but it might as easily have been
next week. These sociopolitical similarities
might have been more rousing if they had
been punched home more boldly. The
occasional bursts of TV news footage
employed here don’t really do the job.

Although Rand’s novel is well over a
thousand pages long, one can’t help
wondering if, with a radically compressed
script, it couldn’t have been turned into a
tightly edited two-and-a-half-hour film—into
a real movie, in other words, not just a
limply illustrated literary classic. Now we
may never know. But this picture is too
lusterless to stir much indignation.
Instead, it leaves us feeling, in Rand’s
words, “the merciless zero of
indifference.”

Americans are clamoring for a fact-based debate
about the budget, but the numbers they're hearing from Washington are
terribly confusing. Here's an example: Speaking at a Facebook town hall
meeting here on Wednesday, President Obama sometimes talked about saving $4
trillion, at other times $2 trillion, and he varied whether it was over 10
years or 12 years, never mentioning any one year.

A simple chart, like the one nearby, would greatly
clarify the debate. It shows total federal government spending year-by-year
for the two decades starting in the year 2000. Spending is shown as a
percentage of GDP, which is a sensible and quite common way to assess
trends: When the percentage rises, government spending rises relative to
total income or total goods and services produced in our economy.

For the past decade, the chart shows the recent
history of government spending. For the next decade—the window for the
current budget—it shows three different spending visions for the future.

The uppermost line shows outlays under the official
budget submitted by Mr. Obama to Congress on Feb. 14. The lowest line shows
the House Budget Resolution submitted by House Budget Committee Chairman
Paul Ryan on April 5, while the third line shows year-by-year outlays I
estimated from the 12-year totals in the new budget proposed by the
president on April 13.

The chart clearly reveals a number of important
facts that are not coming up in town hall meetings. Most obvious is the huge
bulge in spending in the past few years. In 2000 spending was 18.2% of GDP.
In 2007 it was 19.6%. But in the three years since 2009 it's jumped to an
average of 24.4%.

Second, and perhaps even more striking, the chart
shows that Mr. Obama, in his budget submitted in February, proposed to make
that spending binge permanent. Spending would still be more than 24% of GDP
at the end of the budget window in 2021. The administration revealed its
preference in the February budget for a much higher level of government
spending than the 18.2% of GDP in 2000 or the 19.6% in 2007.

Third, the House budget plan proposed by Rep. Paul
Ryan (R., Wis.) simply removes that spending binge—it gradually returns
spending as a share of GDP back to a level seen only three years ago.

When I show people this chart they ask why
Washington is even having the debate. They say: If government agencies and
programs functioned with 19% to 20% of GDP in 2007, why is it so hard for
them to function with that percentage in 2021, when GDP will be
substantially higher and with many opportunities for reforms and increased
efficiencies? And if GDP and employment grow more quickly, as they would if
private investment increased as a result of lower government spending and
debt, then that 19% to 20% share of GDP could provide much more in the way
of public goods.

Fourth, the chart shows that the second Obama
administration budget, submitted a week after the Ryan House budget, is
substantially different from the first administration budget. It is highly
unusual for an administration to decide to submit a second budget, and the
effect of this revision is to move the administration's spending vision
closer to that of the House. But it still leaves a big chunk of the spending
binge in place.

Fifth, and perhaps most important for economic
growth, the chart shows that the House budget effectively deals with the
deficit and brings the debt down as a share of GDP without a tax increase.
Under the current tax system, revenues as a share of GDP were 18.5% in 2007,
so that the budget deficit was only 1.1% of GDP that year. With higher real
incomes moving people into higher tax brackets, it is quite likely that
under the current tax system revenues will be higher as a share of GDP when
the economy fully recovers, perhaps in the 19% to 20% range.

This means that the House budget plan, with
spending in the same range, approximately balances the budget with no
increase in taxes. This is good news for economic growth. In contrast,
balancing the first or even the second Obama budget requires substantial tax
increases—more than the administration has yet to propose.

Mr. Taylor, a professor of economics at Stanford and a senior fellow
at the Hoover Institution, is the author of "Getting Off Track: How
Government Actions and Interventions Caused, Prolonged and Worsened the
Financial Crisis" (Hoover Press, 2009).

If you don't mind sweat, dirt, or the smell of
manure, this is a great time to be a farmer. Incomes are up, land values are
high, and global demand is growing. Oh, and if you're one of the lucky
farmers, there's a bonus: a tap on the federal treasury.

Farm subsidies are an oddity in a competitive,
capitalist economy. In what other business can you expect continuing
government support, whether you need it or not? But by now, they are as
American as kudzu, and about as hard to get rid of.

It was not exactly a surprise, then, that farm
groups and their allies reacted badly when House Budget Committee Chairman
Paul Ryan (R-Wis.), unveiled a list of spending cuts that includes paring
$30 billion from agriculture programs over the next decade.

"We are concerned about cuts that might impact the
safety net that supports our farmers," protested the American Farm Bureau
Federation. The National Farmers Union warned the cuts would "do irreparable
harm to American agriculture."

But the obvious question is not why Ryan proposes
to trim farm subsidies by 20 percent or so. The question is why he doesn't
cut them by 100 percent.

After all, they are at odds with everything
conservatives believe in. They inflate the federal budget, they require
bureaucrats, and they invite the federal government to meddle in areas where
it is not needed.

The old rationale for these programs was that they
redistributed income from affluent city slickers to struggling rural folks.
But that excuse has about as much contemporary relevance as a horse-drawn
plow.

In recent years, the average farm family has
enjoyed an income about 20 percent higher than the average for all families,
not to mention five times more net worth. In 2010, net farm income jumped by
an estimated 20 percent, according to the Department of Agriculture, and net
equity rose nearly 7 percent. The average farm family now makes $86,352 a
year.

Being well-to-do will keep you off Medicaid and
food stamps, but that rule doesn't apply when it comes to farm subsidies.
Just the opposite: The more you have, the more you get.

"From 1995-2009," reports Environmental Working
Group, "the largest and wealthiest top 10 percent of farm program recipients
received 74 percent of all farm subsidies, with an average total payment
over 15 years of $445,127 per recipient."

Farm groups insist these programs are the reason
Americans enjoy an abundance of inexpensive food. But the real reason is
that American agriculture is so productive, steadily producing more and more
crops with fewer workers. Cheap meals are a tribute to the ingenuity and
resourcefulness of our farmers, not the brilliance of our politicians.

Most farmers, in fact, manage with a minimum of
federal help because they raise commodities that don't get subsidies. The
great majority of government payments go to producers of just five crops:
corn, wheat, soybean, rice, and cotton. Yet if you go to the grocery store,
you will find racks filled with potatoes, strawberries, broccoli, tomatoes,
lettuce, nuts, and carrots, grown without being heavily fertilized with tax
dollars.

Here's how the market in those items works: Farmers
plant the crops, harvest the crops, and sell the crops. If things go well,
they earn a profit. If not, they don't.

Those farmers with a knack for making money stay in
business and prosper. Those who lose money go bust. It resembles most of the
other businesses in America—with the notable exception of the rest of
agriculture.

We really have two agriculture systems in this
country. One is based on generous federal subsidies (as with corn and wheat)
or strict federal control of production and imports to keep prices high (as
with sugar and dairy products). The other relies on open markets, the free
interplay of supply and demand, the usual "creative destruction" of a
capitalist economy, and the absence of guarantees.

Professor Alan Blinder from Princeton University today says there's a better
solution than the Ryan Plan, but he's keeping it a secret. When can we see a
realistic deficit reduction plan from progressives? Tax increases just aren't
going to go very far unless we want to kill that 55% of the households that now
pay 100% of the personal Federal income taxes.
.
"Paul Ryan's Reverse Robin Hood Budget His plan for reducing the deficit
isn't 'the only game in town.' It's only the worst," by Alan Blinder,"
The Wall Street Journal, April 19, 2011 ---
http://online.wsj.com/article/SB10001424052748703916004576270832244940992.html?mod=djemEditorialPage_t

Jensen Comment
Professor Blinder's main criticism is that the Ryan Plan is too long term and
does not do enough to reduce the trillions in deficits over the next decade. But
like most progressives he offers zero hints as to what will be a "better game in
town" to reduce deficits now. Presumably he wants to confiscate the incomes of
people now making over $250,000 per year, but he really doesn't want to discuss
a proposed game plan for tax increases because he secretly knows this will not
be enough to make much difference on the deficits and probably will be highly
dysfunctional in terms of unemployment. Secretly he most likely supports his
Princeton colleague's, Krazy Krugman's, solution of printing dollars to reduce
deficits and pay for my wife's forthcoming very expensive surgery.

Zimbabwe showed Ben Bernanke, Alan Blinder, and Paul Krugman the way to
reduce government deficits. Why can't they convince the rest of us that printing
presses are the answer to deficit reduction?

And, if we keep redefining inflation by taking more and more commodities and
services out of the calculation, things won't look so bad while were printing
$15 trillion dollars for starters.

Eventually, the "Core" CPI might only include empty houses and vacant yachts.

Questions
Is it possible to eliminate a $1.5 trillion deficit by increasing rates for
taxpayers earning more than $250,000 per year?
Is it possible to eliminate the above deficit by increasing tax rates for all
taxpayers?

Answers
In theory no to Question 1 and yes to Question 2, but in reality, closing the
Federal spending gap with tax rate increases would be a total disaster on the
economy to a point where the government might take in less rather than more tax
revenue.

Firstly the answer is no unless you more than double what the poor and middle
class pay in taxes. And since nearly half the households in the U.S. do not pay
any Federal income tax, Congress would probably have to figure how to squeeze
blood out of turnips. This would have an extremely adverse impact on middle and
lower income families already deep in debt to to pay medical, housing, and
education expenses.

Secondly, the answer is no if you anticipate that most taxpayers that have
any form of savings would probably stampede to invest in tax free alternatives
such as tax free municipal bonds and bond funds. This coupled with the fact that
most savings would be confiscated by the government with such tax increases that
business cost of capital and unemployment would soar out of sight. This would be a disaster for
business firms seeking capital. But this is what the progressives really want
all along. They prefer that most of the jobs move from the private to the public
sector. But the Great Depression proved that with all the New Deal efforts to
employ workers in the government, the unemployment rate never dipped below 14%
until World War II came along to save the U.S. economy at the expense of the
European treasuries of our allies in the war.

The option for raiding European treasuries is not on the table with respect
to the Obama and Princeton University (read that Professors Blinder and Krugman
tax increase) plans for this forthcoming decade.

Thirdly, many taxpayers now paying something into the U.S. Treasury would be
thrown out of work and impact on the economy would be far worse than the Great
Depression of the 1930s.

But if we could wave a magic wand and prevent all the dynamic reactions to
tax rate increases, one solution would look something like this --- keeping in
mind that all of this is pure fantasy since the dynamic reactions really cannot
be prevented. From Paul Caron's TaxProf Blog on April 18, 2011 ---
http://taxprof.typepad.com/

Now what really is your plan, Professor Blinder, that is so superior to the
Ryan Plan for reducing the trillions in deficits over the next decade?

Oh, I see! It's still a secret. But it's bound to be better. Yeah right!

Tax Day (April 18) is fast approaching,
which means anxiety and night sweats for
about 99 percent of us.

And bitching and
moaning by those at the top of the income
pyramid about how they aren't forced to pay
even more in taxes. (The top 1 percent of
filers pay
about 40 percent
of income taxes.)

Secretary of state and cattle-futures queen
Hillary Clinton, super-investor Warren
Buffett, and best-selling author Stephen
King have all recently carped about how rich
folks like them should be paying more in
taxes. King recently told a Florida rally,
"As a rich person, I'm paying 28 percent in
taxes. What I want to ask you is, why am I
not paying 50?"

But when it comes to
the country's balance sheet, the U.S.
doesn't have a revenue problem or a tax-rate
problem.
We've got a spending problem.
Since 1950, revenue
from all sources has averaged around 18
percent of Gross Domestic Product, despite
top tax rates that have fluctuated from over
90 percent to the high 20-percent range.
Regardless of all efforts to jack up revenue
(or reduce it), that's what the government
can expect to work with.

Yet spending has averaged about 20 percent
of GDP - and is currently at a whopping 25
percent of GDP, a figure not seen since
World War II. President Obama's budget plan
forecasts spending at 23 percent of GDP over
the next decade while Rep. Paul Ryan's GOP
plan calls for 20.5 percent. There's your
deficit right there, folks.

But King, Clinton, and
Buffett - and you, too - can always pay more
to retire federal debt held by the public.
Just go to Treasury
Directand make a
voluntary donation to reduce the national
debt held by the public. So far in calender
2011, Treasury has pulled in an $125,000!
Which means there's only about $8.99
trillion to go.

Jensen Comment
This article has a misleading title and is not really a good reference for how
to get us out of our budget deficits mess. It's more about omissions in the GDP
calculation. The concluding paragraph reads as follows:

NB:
You might be wondering: "Hey! What happened to Mama Jones?". Well, the
answer's simple. She's spent her life toiling to raise the kids and keep the
household together — and it was never easy. But just as the industrial age
contraption of GDP leaves out "voluntary" and "household" work from our
so-called economy pretty much entirely, so too, in my little allegory, do
Mama Jones' contributions go largely unrecognized and unrewarded.

It's interesting how one of the side effects of China's effort to control
population and discourage having children is the rise in the tendency for
married couples in China to live far apart for employment opportunities for both
spouses and to enjoy each others' company at occasional meeting sites. This of
course would not be possible for Mama Jones whose life is devoted to raising a
family.

Hi Louis and Linda,
I probably would never do research on privileged budget items because it is
so complicated and confounded with externalities.

When it comes to government spending, one has to first distinguish those
budget items that are discretionary versus non-discretionary. To do this we
need some type of criterion. One criterion to consider is whether or not a
contract would make the item binding in court. As I mentioned previously
many retirement contracts allow beneficiaries to take breaches of contract
to court, which is why Congress does not mess with cutting military
pensions.

There are, of course, gray zones. Presumably Congress can choose to add
surtaxes to all pensions that it pays, including military pensions and
Social Security. Or it can choose to tax medical benefits that it pays such
as taxes on usage of Veterans Hospitals or taxes and higher deductibles on
Medicare claims.

Another gray area that makes non-discretionary budget items somewhat
discretionary is already being practiced in Medicare. You can keep allowing
less and less for medical services such that claimants can only get cheap
and inferior doctors. For example, the
surgeon who performed my wife's surgeries three and four under Medicare
would not do surgery Number 5 because he stopped accepting any Medicare
patients.This means by law
that he cannot accept patients who are eligible for Medicare even if they
are willing to pay his fees from private funds. May wife had to find another
surgeon in another state.

Under the Romney Care "universal" health insurance plan in Massachusetts,
some hospitals discovered the plan was not paying enough to cover
out-of-pocket expenses, especially malpractice insurance premiums. So those
hospitals dropped the services that had the highest malpractice insurance
premiums. Read that as meaning that those hospitals dropped obstetrics
departments and refused obstetrics services to all women. These women can
still find hospitals that offer such services but the distances are further
and the lines are longer and the services are not nearly as good in many
instances.

Also the outstanding orthopaedic hospital in Boston where my wife now has
spinal surgeries dropped its emergency room services. An externality of
Romney care was reduced medical services for all patients, including those
that have premium medical insurance plans from employers. Those on premium
plans have fewer choices for emergency rooms and trauma centers because of
Romney Care.

There's a huge difference between General Motors and the government when it
comes to budget cutting. General Motors cannot print money and reached a
point where it was impossible to meet pension and health care contracts with
retirees. In that case the bankruptcy court modified the contracts. In the
case of government pensions and medical benefits for retirees, rather than
declare bankruptcy our Federal government will probably just print the money
needed to honor the contracts. Welcome to Zimbabwe.

Our state governments like California are in more of a bind. State
governments might have to declare bankruptcy and have the bankruptcy courts
restructure retirement contracts. At one time Canada came close to losing
its national government in favor of provincial governments that would, among
other things, print their own currencies. This is no longer entirely out of
the question for our 50 states in the United States who would like an option
to print their own currencies.

As far as "privileges" within government budget items deemed discretionary,
the top privileges typically go to public safety. Police, fire, and National
Guard budgets are being cut somewhat but they are protected from enormous
cuts by fears in the minds of voters. As far as Federal government military
budgets are concerned, an extremely expensive item in budgets is for
advanced warfare and defense technology. However, not many voters are
willing to fall behind our enemies on warfare technology, including
technology for blocking communications --- such as when an unnamed
advanced-technology nation allegedly shut down the nuclear centrifuges in
Iran.

Another extremely expensive budget item is our CIA, but not many voters will
accept CIA budget cuts on the premise that "ignorance is bliss."

It's one thing to point out research about tax increases and spending cuts
on a very broad scale, but when it comes to specifics it becomes an
explosive debate that can be political suicide. We now have two choices with
trillions in budget deficits. We can raise taxes and make huge spending
cuts. Or we keep putting off remedies like we've done for the past two
decades at reach a point where it's no longer possible to save the patient.

Some professors in ivory towers might think it is possible to totally
eliminate our international fighting force in favor of a beefed up domestic
police force. But the unfunded expenses of past wars will continue to linger
over our heads. And it's questionable how many terror attacks this nation is
willing to experience with an impotent international fighting force for
prevention of future attacks.

But I really don't want to get into the question of line item budget cuts.
This is also probably too explosive for the AECM in terms of politics. We
can, however, debate broad issues like whether it's possible to tax
ourselves out of trillion dollar deficits with very little serious budget
cutting.

In the United States, health care technology
has contributed to rising survival rates, yet health care spending
relative to GDP has also grown more rapidly than in any other country.
We develop a model of patient demand and supplier behavior to explain
these parallel trends in technology growth and cost growth. We show
that health care productivity depends on the heterogeneity of treatment
effects across patients, the shape of the health production function,
and the cost structure of procedures such as MRIs with high fixed costs
and low marginal costs. The model implies a typology of medical
technology productivity: (I) highly cost-effective “home run”
innovations with little chance of overuse, such as anti-retroviral
therapy for HIV, (II) treatments highly effective for some but not for
all (e.g. stents), and (III) “gray area” treatments with uncertain
clinical value such as ICU days among chronically ill patients. Not
surprisingly, countries adopting Category I and effective Category II
treatments gain the greatest health improvements, while countries
adopting ineffective Category II and Category III treatments experience
the most rapid cost growth. Ultimately, economic and political
resistance in the U.S. to ever-rising tax rates will likely slow cost
growth, with uncertain effects on technology growth.

This paper strikes me as sensible, explanatory, and
non-ideological to the max. It would be nifty if the people who work in
Washington read it, and thought about it, and maybe even acted on it. (And
it would be nifty if the Knicks beat the Celtics too, but I’m not holding my
breath for either outcome …)

Here’s a very good paragraph from the paper:

The science section of a U.S. newspaper
routinely features articles on new surgical and pharmaceutical
treatments for cancer, obesity, aging, and cardiovascular diseases, with
rosy predictions of expanded longevity and improved health functioning (Wade,
2009). The business section, on the other hand, features gloomy reports
of galloping health insurance premiums (Claxton et al.,
2010), declining insurance coverage, and unsustainable Medicare and
Medicaid growth leading to higher taxes (Leonhardt,
2009) and downgraded U.S. debt (Stein, 2006). Not
surprisingly, there is some ambiguity as to whether these two trends, in
outcomes and in expenditures, are a cause for celebration or concern.

And the authors offer good specific examples of
what they built their argument on, noting the …

Last week, the NAACP released a report with a
blunt, but sadly accurate, title —
Misplaced Priorities.I could not help but think
about this title in terms of the House of Representatives' proposed zeroing
out of YouthBuild. YouthBuild has been
rigorously evaluated and justifiably acclaimed for its success in turning
around the lives of troubled youths, many court-involved, most of color,
living in urban centers across the country.

The program keeps them out of prison, provides them
with an education, work skills, and a supportive network. By building
affordable housing units, it gives them the chance to invest in their
communities and become leaders there. This is exactly the type of rethinking
our Think Tank is designed to encourage/embrace as
we gather in two weeks to contemplate/figure out ways to revitalize our
cities.

All for $16,000 per youth — what we might call a
bargain. Even before any cuts, almost 20,000 youths are turned away from
YouthBuild each year because of lack of funding. If the House gets its way,
YouthBuild programs across the country will be decimated. The result: more
crime, more poverty, more joblessness, more substance abuse, more fractured
families, less state revenue, more despair. Misplaced Priorities hardly
captures the astonishing myopia of the House's proposal. As Woody Guthrie
once sang, "Some rob you with a sixgun, some with a fountain pen."

At the
Charles Hamilton Houston Institute for Race and Justice,
we examine these types of investment choices, and the
trade-offs that are made, regularly, when we choose the most expensive and
least effective interventions, such as prisons, juvenile halls, and death
penalty prosecutions, over programs like YouthBuild, that actually promote
public safety and improve quality of life in communities hardest hit by
crime and violence.

As an example, let's consider North Carolina. Last
year, Philip Cook, an economics professor at Duke University,
released findings that the continued use of the death penalty
(link PDF) costs North Carolina taxpayers almost $11 million more than they
would spend if the state replaced capital punishment with life sentences
without the possibility of parole. These costs include additional attorneys,
resources demanded by the District Attorney and courts for capital
prosecutions, and the lengthy appeal process. These costs continue to be
incurred by the state each year, even though death sentences have declined
considerably and no one has been executed there since 2007.

What might that $11 million buy if it were
reinvested? Well, for starters, it could provide almost 700 slots to youths
who wanted to join YouthBuild. Another choice? The Alliance for Excellent
Education estimates that a 5% increase in male high school graduates in
North Carolina would generate annual savings of approximately $152 million.
In addition to these increased savings, this rise in graduation rates would
also yield $80 million in annual earnings.

So, why not invest that $11 million in implementing
the Talent Development program in more high schools in the state? Talent
Development provides structured support to struggling students during the
critical ninth grade year, a year when many students opt to drop out. Like
YouthBuild, it has
been subject to rigorous independent evaluations. At an average cost of
$200,000 per school, an additional $11 million could provide 55 schools in
the state with an intervention that will prevent early dropouts. By any
objective measure, an investment in either of these programs will yield far
greater public safety returns — not to mention actual revenue — than capital
prosecutions.

The fundamental question that we at the Houston
Institute are trying to illuminate with this type of analysis is this one:
In an era of drastically shrinking public resources, is the choice to
continue to lavish public dollars on the most expensive and least effective
interventions, even as entire communities of color are starved for the
resources and opportunities they need to thrive, a deliberate one? Or, if
given more complete information about the public safety returns of
alternative strategies and investments, would lawmakers and the public
choose differently?

It wasn't your usual legislative hearing. A group
of largely Republican California lawmakers and Democratic Lt. Gov. Gavin
Newsom traveled here last week to hear from businesses that have left their
state to set up shop in Texas.

"We came to learn why they would pick up their
roots and move in order to grow their businesses," says GOP Assemblyman Dan
Logue, who organized the trip. "Why does Chief Executive magazine rate
California the worst state for job and business growth and Texas the best
state?"

The contrast is undeniable. Texas has added 165,000
jobs during the last three years while California has lost 1.2 million.
California's jobless rate is 12% compared to 8% in Texas.

"I don't see this as a partisan issue," Mr. Newsom
told reporters before the group met with Texas Republican Gov. Rick Perry.
The former San Francisco mayor has many philosophical disagreements with Mr.
Perry, but he admitted he was "sick and tired" of hearing about the
governor's success luring businesses to Texas.

Hours after the legislators met with Mr. Perry,
another business, Fujitsu Frontech, announced that it is abandoning
California. "It's the 70th business to leave this year," says California
business relocation expert Joe Vranich. "That's an average of 4.7 per week,
up from 3.9 a week last year." The Lone Star State was the top destination,
with 14 of the 70 moving there.

Andy Puzder, the CEO of Hardee's Restaurants, was
one of many witnesses to bemoan California's hostile regulatory climate. He
said it takes six months to two years to secure permits to build a new
Carl's Jr. restaurant in the Golden State, versus the six weeks it takes in
Texas. California is also one of only three states that demands overtime pay
after an eight-hour day, rather than after a 40-hour week. Such rules wreak
havoc on flexible work schedules based on actual need. If there's a line out
the door at a Carl's Jr. while employees are seen resting, it's because they
aren't allowed to help: Break time is mandatory.

"You can't build in California, you can't manage in
California and you have to pay a big tax," Mr. Puzder told the legislators.
"In Texas, it's the opposite—which is why we're building 300 new stores
there this year."

Alexis de Tocqueville once described what he saw as
a chief part of the peculiar genius of American society—something he called
“self-interest properly understood.” The last two words were the key.
Everyone possesses self-interest in a narrow sense: I want what’s good for
me right now! Self-interest “properly understood” is different. It means
appreciating that paying attention to everyone else’s self-interest—in other
words, the common welfare—is in fact a precondition for one’s own ultimate
well-being. Tocqueville was not suggesting that there was anything noble or
idealistic about this outlook—in fact, he was suggesting the opposite. It
was a mark of American pragmatism. Those canny Americans understood a basic
fact: looking out for the other guy isn’t just good for the soul—it’s good
for business.

The top 1 percent have the best houses, the best
educations, the best doctors, and the best lifestyles, but there is one
thing that money doesn’t seem to have bought: an understanding that their
fate is bound up with how the other 99 percent live. Throughout history,
this is something that the top 1 percent eventually do learn. Too late.

They say America is politically divided. But in the
days following the appearance of Paul Ryan's GOP budget in the firmament
last week, the planets of political debate finally aligned. We were all
agreed: The issues before us were the future of federal spending, the future
of federal entitlement programs, and the future of federal taxes. The terms
set, the debate would proceed—after the president of the United States
addressed the subject in a major speech on the nation's fiscal future.

Instead, Barack Obama at George Washington
University poisoned the well. Where is Rahm Emanuel when we need him?

Did someone move the 2012 election to June 1? We
ask because President Obama's extraordinary response to Paul Ryan's budget
yesterday—with its blistering partisanship and multiple distortions—was the
kind Presidents usually outsource to some junior lieutenant. Mr. Obama's
fundamentally political document would have been unusual even for a Vice
President in the fervor of a campaign.

The immediate political goal was to inoculate the
White House from criticism that it is not serious about the fiscal crisis,
after ignoring its own deficit commission last year and tossing off a $3.73
trillion budget in February that increased spending amid a record deficit of
$1.65 trillion. Mr. Obama was chased to George Washington University
yesterday because Mr. Ryan and the Republicans outflanked him on fiscal
discipline and are now setting the national political agenda.

Mr. Obama did not deign to propose an alternative
to rival Mr. Ryan's plan, even as he categorically rejected all its reform
ideas, repeatedly vilifying them as essentially un-American. "Their vision
is less about reducing the deficit than it is about changing the basic
social compact in America," he said, supposedly pitting "children with
autism or Down's syndrome" against "every millionaire and billionaire in our
society." The President was not attempting to join the debate Mr. Ryan has
started, but to close it off just as it begins and banish House GOP ideas to
political Siberia.

Mr. Obama then packaged his poison in the rhetoric
of bipartisanship—which "starts," he said, "by being honest about what's
causing our deficit." The speech he chose to deliver was dishonest even by
modern political standards. ***

The great political challenge of the moment is how
to update the 20th-century entitlement state so that it is affordable. With
incremental change, Mr. Ryan is trying maintain a social safety net and the
economic growth necessary to finance it. Mr. Obama presented what some might
call the false choice of merely preserving the government we have with no
realistic plan for doing so, aside from proposing $4 trillion in phantom
deficit reduction over a gimmicky 12-year budget window that makes that
reduction seem larger than it would be over the normal 10-year window.

Mr. Obama said that the typical political proposal
to rationalize Medicare's gargantuan liabilities is that it is "just a
matter of eliminating waste and abuse." His own plan is to double down on
the program's price controls and central planning. All Medicare decisions
will be turned over to and routed through an unelected commission created by
ObamaCare—which will supposedly ferret out "unnecessary spending." Is that
the same as "waste and abuse"?

Fifteen members will serve on the Independent
Payment Advisory Board, all appointed by the President and confirmed by the
Senate. If per capita costs grow by more than GDP plus 0.5%, this board
would get more power, including an automatic budget sequester to enforce its
rulings. So 15 sages sitting in a room with the power of the purse will
evidently find ways to control Medicare spending that no one has ever
thought of before and that supposedly won't harm seniors' care, even as the
largest cohort of the baby boom generation retires and starts to collect
benefits.

Mr. Obama really went off on Mr. Ryan's plan to
increase health-care competition and give consumers more control, barely
stopping short of calling it murderous. It's hardly beyond criticism or
debate, but the Ryan plan is neither Big Rock Candy Mountain nor some
radical departure from American norms.

Mr. Obama came out for further cuts in the defense
budget, but where? His plan is to ask Defense Secretary Bob Gates and Joint
Chiefs Chairman Mike Mullen "to find additional savings," whatever those
might be, after a "fundamental review." These mystery cuts would follow two
separate, recent rounds of deep cuts that were supposed to stave off further
Pentagon triage amid several wars and escalating national security threats.

Mr. Obama rallied the left with a summons for major
tax increases on "the rich." Every U.S. fiscal trouble, he claimed, flows
from the Bush tax cuts "for the wealthiest 2%," conveniently passing over
what he euphemistically called his own "series of emergency steps that saved
millions of jobs." Apparently he means the $814 billion stimulus that failed
and a new multitrillion-dollar entitlement in ObamaCare that harmed job
creation.

Under the Obama tax plan, the Bush rates would be
repealed for the top brackets. Yet the "cost" of extending all the Bush
rates in 2011 over 10 years was about $3.7 trillion. Some $3 trillion of
that was for everything but the top brackets—and Mr. Obama says he wants to
extend those rates forever. According to Internal Revenue Service data, the
entire taxable income of everyone earning over $100,000 in 2008 was about
$1.582 trillion. Even if all these Americans—most of whom are far from
wealthy—were taxed at 100%, it wouldn't cover Mr. Obama's deficit for this
year.

Mr. Obama sought more tax-hike cover under his
deficit commission, seeming to embrace its proposal to limit tax deductions
and other loopholes. But the commission wanted to do so in order to lower
rates for a more efficient and competitive code with a broader base. Mr.
Obama wants to pocket the tax increase and devote the revenues to deficit
reduction and therefore more spending. So that's three significant tax
increases—via higher top brackets, the tax hikes in ObamaCare and fewer tax
deductions.

Tuesday is Equal Pay Day—so dubbed by the National
Committee for Pay Equity, which represents feminist groups including the
National Organization for Women, Feminist Majority, the National Council of
Women's Organizations and others. The day falls on April 12 because,
according to feminist logic, women have to work that far into a calendar
year before they earn what men already earned the year before.

In years past, feminist leaders marked the occasion
by rallying outside the U.S. Capitol to decry the pernicious wage gap and
call for government action to address systematic discrimination against
women. This year will be relatively quiet. Perhaps feminists feel awkward
protesting a liberal-dominated government—or perhaps they know that the
recent economic downturn has exposed as ridiculous their claims that our
economy is ruled by a sexist patriarchy.

The unemployment rate is consistently higher among
men than among women. The Bureau of Labor Statistics reports that 9.3% of
men over the age of 16 are currently out of work. The figure for women is
8.3%. Unemployment fell for both sexes over the past year, but labor force
participation (the percentage of working age people employed) also dropped.
The participation rate fell more among men (to 70.4% today from 71.4% in
March 2010) than women (to 58.3% from 58.8%). That means much of the
improvement in unemployment numbers comes from discouraged
workers—particularly male ones—giving up their job searches entirely.

Men have been hit harder by this recession because
they tend to work in fields like construction, manufacturing and trucking,
which are disproportionately affected by bad economic conditions. Women
cluster in more insulated occupations, such as teaching, health care and
service industries.

Yet if you can accept that the job choices of men
and women lead to different unemployment rates, then you shouldn't be
surprised by other differences—like differences in average pay.

Feminist hand-wringing about the wage gap relies on
the assumption that the differences in average earnings stem from
discrimination. Thus the mantra that women make only 77% of what men earn
for equal work. But even a cursory review of the data proves this assumption
false.

The Department of Labor's Time Use survey shows
that full-time working women spend an average of 8.01 hours per day on the
job, compared to 8.75 hours for full-time working men. One would expect that
someone who works 9% more would also earn more. This one fact alone accounts
for more than a third of the wage gap.

Choice of occupation also plays an important role
in earnings. While feminists suggest that women are coerced into
lower-paying job sectors, most women know that something else is often at
work. Women gravitate toward jobs with fewer risks, more comfortable
conditions, regular hours, more personal fulfillment and greater
flexibility. Simply put, many women—not all, but enough to have a big impact
on the statistics—are willing to trade higher pay for other desirable job
characteristics.

Men, by contrast, often take on jobs that involve
physical labor, outdoor work, overnight shifts and dangerous conditions
(which is also why men suffer the overwhelming majority of injuries and
deaths at the workplace). They put up with these unpleasant factors so that
they can earn more.

Recent studies have shown that the wage gap
shrinks—or even reverses—when relevant factors are taken into account and
comparisons are made between men and women in similar circumstances. In a
2010 study of single, childless urban workers between the ages of 22 and 30,
the research firm Reach Advisors found that women earned an average of 8%
more than their male counterparts. Given that women are outpacing men in
educational attainment, and that our economy is increasingly geared toward
knowledge-based jobs, it makes sense that women's earnings are going up
compared to men's.

Britain's Independent Banking Commission
came out with an interim report Monday that
identified the broad outline of the country's future banking regulation. The
report's findings had been the subject of a fair amount of media
speculation, fanned by reports that two of Britain's biggest Banks, HSBC and
Barclays, would decamp (respectively) to Hong Kong and New York. Many
commentators saw this as a not-so-veiled threat to the Commission that
draconian recommendations would compromise London's competitiveness as a
center for international banking.

The report has probably laid those fears to rest.
If its recommendations were implemented, it would, if anything, bring
British regulation closer to the post-Glass-Steagal US model, which largely
ring-fences without actually separating retail and investment banking.
Depositors would also have to forego state insurance on deposits held with
bank groups without a UK head office. Since British depositors lost a fair
amount of money in the collapse of Iceland's banks in 2008 and would
presumably be sensitive on this issue, the absence of a guarantee should
give pause to any bank considering relocation.

More generally, how do the proposals stack up? Some
components make intuitive sense. Putting depositors ahead of lenders, for
instance, could reduce the likelihood that the politicians would have to
bail out banks in the future. Bondholders and wholesale lenders are much
better placed than retail depositors to deal with banking crises and their
fallouts. As long as a collapsed bank could cover retail depositors, the
government could stay on the sidelines.

The Patient Protection and Affordable Care Act
includes many provisions that have nothing to do with health care: the CLASS
act, a student loan overhaul, and many new taxes. These provisions don't
change the health care system. They just raise money to pay for the new law.
Strip them away and the law’s actual health care provisions don't lower the
deficit—they increase it!

As you can see, from 2012 to 2021, the
Congressional Budget Office estimates that the health care act will reduce
deficits by $210 billion (note that this estimate differs from the widely
cited $143 billion figure used during the lead-up to the passage of the
act). During this same time period, however, the actual health care reform
provisions of the law will increase deficits by $464 billion.

Of course, one should not evaluate the health care
legislation on its fiscal impacts alone. In theory we should get some fiscal
benefits. But the key question is how they net out. Still, no matter what
you think about the benefits of the health care legislation, it is incorrect
to claim that health care reform will save money. It won’t.

Myth 2: The U.S. health care system is a
free-market system.

Fact 2: Roughly half of all U.S. health care is
currently paid for by the government.

. . .

Even in the absence of the health care reform law,
government programs including Medicare and Medicaid already fund almost half
of American health care. Roughly a third of the remaining expenditures are
funded by private insurers—mainly through subsidized and highly regulated
employee plans. Not exactly a free market.

As this chart shows, state and federal entities
make up over half of the health insurance market. Of course, the Patient
Protection and Affordable Care Act will only increase the share of
government involvement in the health care market.

Myth 3: Medicare spending increases life expectancy
for seniors. Reductions in Medicare spending will therefore reduce their
life expectancy.

Fact 3: Increases in life expectancy for seniors
are due to increased access to health care, not to Medicare.

While Medicare spending has certainly decreased
seniors’ out of pocket health care expenses (by 1970, Medicare reduced out
of pocket expenses by an estimated 40 percent relative to pre-Medicare
levels), the program’s effect on mortality is much less clear.

After former Federal Reserve Chairman Paul Volcker
was appointed in 1979, the consumer price index surged into the double
digits, causing the now revered Fed Chief to double the benchmark interest
rate in order to break the back of inflation. Using the methodology in place
at that time puts the CPI back near those levels.

Inflation, using the reporting methodologies in
place before 1980, hit an annual rate of 9.6 percent in February, according
to the Shadow Government Statistics newsletter.

Since 1980, the Bureau of Labor Statistics has
changed the way it calculates the CPI in order to account for the
substitution of products, improvements in quality (i.e. iPad 2 costing the
same as original iPad) and other things. Backing out more methods
implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate
and getting worse, according to the calculations by the newsletter’s web
site, Shadowstats.com.

“Near-term circumstances generally have continued
to deteriorate,” said John Williams, creator of the site, in a new note out
Tuesday. “Though not yet commonly recognized, there is both an intensifying
double-dip recession and a rapidly escalating inflation problem. Until such
time as financial-market expectations catch up with underlying reality,
reporting generally will continue to show higher-than-expected inflation and
weaker-than-expected economic results in the month and months ahead.”

The pay-site and newsletter by Williams, an
economic consultant for the last 30 years to companies, has gained a cult
following among bloggers hungry to criticize Bernanke these days. The
mission statement of the newsletter, according to the site, is to expose and
analyze “flaws in current U.S. government economic data and reporting…net of
financial-market and political hype.”

Investors are anxiously awaiting the release of
March’s CPI reading on Friday. The consensus estimate from economists is for
an annual inflation rate of 2.6 percent.

“Given ongoing inflation problems with food and the
spreading impact of higher oil-related costs in the broad economy, reporting
risk is to the upside of consensus expectation,” said Williams, citing a 10
percent jump in gasoline prices in March, in the note.

“While the federal government would have us believe
the numbers are rather tame, our own personal gauge leads us to believe
inflation is running between 5 percent to 6 percent annually,” wrote Alan
Newman in his latest Crosscurrents newsletter that refers to Williams’
statistics.

A month ago, education ministers and teachers union
presidents from the 16 top-performing and improving countries—including
Finland, South Korea, Singapore, Brazil and Canada—came to New York to
participate in an international conference on public education sponsored by
the Organization for Economic Cooperation and Development and the U.S.
Department of Education. The education leaders of these countries presented
with impressive clarity all the methods they are using to improve student
learning and strengthen teacher quality.

During the conference, it became abundantly clear
that market-based reforms promoted by the so-called reformers in the United
States have little in common with the education policies in these leading
nations. And well before the conference, it was increasingly clear that
there has been little or no evidence in the last 20 years to show that
market-based reforms have transformed schools and increased student
learning.

With supreme certainty and blind zeal, market-based
reformers are doubling down on an agenda that has failed to produce the
transforming gains they promised. They disparage and delegitimize any gains
that traditional public schools as well as their teachers (and their unions)
have delivered for kids.

Market-based reformers advocate using student test
scores to evaluate and compensate teachers, increasing the number of charter
schools, firing teachers in low-performing schools, and relying on corporate
executives and business practices to run school districts. This ideological
approach has generated a great deal of media attention, and it has been sold
aggressively by its advocates. But there is increasing evidence it doesn't
work.

A 2009 Stanford University study found 17% of
charter schools provide a superior education to that which students receive
in traditional public schools, but that nearly half of charter schools have
results that are no better than neighborhood schools. Over a third deliver
results that are worse. A 2010 Vanderbilt University study was the third
consecutive national study to show that rewarding teachers with bonus pay
does not raise student test scores. And we need look no further than the
recent resignation of New York City Schools Chancellor Cathie Black, after
being on the job for only three months, to conclude that experience in
education matters should be valued—not diminished.

Nor do these self-styled reformers pay much
credence to what leading countries like Finland, Singapore and South Korea
have done and are doing to transform their school systems. These countries
emphasize teacher preparation, mentoring and collaboration. They revere and
respect their teachers; they don't demonize them. Virtually all of them are
unionized. In fact, school leaders in these countries work very closely with
their unions, and most said they would never introduce changes or
legislation without union collaboration.

. . .

Continued in article

Ms. Weingarten is the president of the American Federation of
Teachers.

Jensen Comment
The makes us wonder about what the nations of Finland, South Korea, Singapore,
Brazil and Canada do to rid themselves of bad teachers (including chronic
absentee teachers). It makes us wonder whether any of these nations are like NYC
where the bad teachers are paid full time to do nothing when they're taken out
of the classroom.

This makes us wonder how many hours a day are spent in a Chicago school
versus a school in Finland, South Korea, Singapore, Brazil and Canada. It would
also be interesting to compare the teaching work rules and yearly classroom time
of these various nations.

I don't know that the education system in Brazil is better than that in the
United States. And comparing the United States with Finland, South Korea, and
Singapore is like comparing apples with oranges. The United States has an
enormous problem with urban drug crime, street gangs, and minority ghettos.
These greatly complicate public education when children and teachers are unsafe
inside and outside of their schools. Providing a safe environment may solve over
half of the problem with K-12 education in the United States.